Ratio Analysis Services -

Financial Ratio Analysis For Easy Interpretation of Complex Numbers

Do you know what is a ratio analysis and do you conduct the same for your business? If not, you are missing out on meaningful business interpretation. Ratio Analysis refers to comparing different items appearing in the books of accounts or financial statements to give a precise and understandable interpretation. Financial ratio analysis is a way of understanding its health in terms of its liquidity and profitability. One common interest of stakeholders, including the company itself, is to assess how efficiently a company is operating by analyzing revenue, liquidity, and profitability.
A reading of financial statements likely won’t provide all the information necessary for readers, meaning it is necessary to put numbers in a specific format to understand better different aspects of your company’s operations and its health. We at Whiz Consulting can take charge of your accounting needs with advanced skills in ratios analysis. We offer accounting services that identify and calculate ratios in the format you need them. Our accounting experts are prepared to factor in varying ratios to give you an in-depth understanding of your company’s financial performance. We help simplify various aspects of your company that would not be apparent from just looking at the financial statements.

It compares the company’s ability to earn or generate revenue with its expenses to arrive at the desired return rate and recognise any shortfall. It includes ratios like-

It measures the ability of a company to pay its day to day debt on time. It is an important ratio or test to determine the company’s ability to cover short-term obligations and cash flow. It includes the ratios like:

Return on Investment or Return on assets measures the amount of return on investment, about the investment cost. It is a broad measure of investment profitability. It includes the ratios like:

It measures how well a company operate their assets to generate income. It also signifies the time a company takes to collect cash from a customer or the time it takes to convert inventory into cash, i.e. making sales. These ratios are also used by the company and its investors and creditors for looking at the company’s profitability and comparing them with the competition. It includes the ratios like:

It measures the company’s ability to make payments and pay off its long-term obligations to creditors. A balanced solvency & Leverage ratio indicate a more creditworthy and financially sound company in the long term. It includes the ratios like:

These ratios help to understand the economic status of the stock of a particular public traded company. They determine the connection between the price per share of a company and its earnings, growth and assets, or we can say it helps indicate the value of a company. It includes the Ratios like:

The prime benefit of accounting ratios is – simplification. By breaking down complex accounting and financial information into ratios, it’s easier to see how a company is performing on its efficiency, solvency, financial efficiency, etc.

Ratios allow a business to look over time at how things have been running. Managers will identify band trends and set priorities for the future.

Ratios can help make comparisons more accurate as they can demonstrate how a company is managing itself compared to its competitors in the industry. Your Ratios might illustrate how you compare to different sectors within your industry.

The purpose of ratio analysis is to make stakeholders understand the financial health of a business. Financial statements are not sufficient to provide information to their readers or stakeholders. It is incomplete on its own without any interpretation, especially when a reader is not well versed with accounting terms. The figures shown in those statements are required to be put into such a form that stakeholders can have a better understanding of different aspects of the company’s operations. Ratio Analysis can be useful for this.

One major drawback of ratio analysis is that you must calculate multiple ratios to understand your financial health. A single ratio can not help you reach any conclusion. Also, ratio analysis is based on quantitative aspects, and it neglects qualitative aspects of a business

Financial ratio analysis is the practice of comparing two or more items of financial data of a business’s financial statements. Financial ratio analysis helps businesses to know their profitability, liquidity state, leveraging control, efficiency, ROI and the economic status of the stock in the case of a public traded company.